Business

RE-Registering Your Business

If you own or are a shareholder of an OOO (limited liability Russian company), you may have received an e-mail from a member of staff about a new law out which states that you have to re-register your business. By now, you should already be well on the way to getting all the relevant paperwork together, otherwise come New Year, you may find that your company is no longer a valid legal entity.

The law governing limited companies was changed in December of last year. The Federal Law No. 312-FZ dated December 30, 2008 “On changes to Part 1 of the Civil Code and other laws of the Russian Federation” introduced changes to Law No. 14-FZ “On limited liability companies”, Civil Code and Law No. 129-FZ “On state registration of legal entities and individual entrepreneurs”. This law came into force on July 1, 2009, and affects the huge number of entrepreneurs whose companies are registered in the most popular legal form of a limited liability company; OOO.

A number of lawyers have commented that it is very strange why this law came into force just in the middle of the holiday season when many of the a$ ected entrepreneurs were actually outside of Russia.

The changes oblige all OOOs registered before July 1, 2009, to change their incorporation documents and register the changes with the relevant registration authority from July 1, 2009 through December 31, 2009. Otherwise a registered OOO will not be able to continue its activity starting from the New Year.

The following changes have to be (if necessary) made to the incorporation documents of an OOO: The Incorporation Agreement is to be excluded from incorporation documents, and along with changing the status of the agreement it must be re-named as an Agreement on Incorporation of an OOO. The company charter is deemed to become the only incorporation document which does not, on an obligatory basis, contain information on shareholders, and the size and value of their shares (as was required before). Another change stipulates that a shareholder may leave an OOO without the agreement of other shareholders only if this kind of exit is stipulated in the charter. Such a provision should therefore be introduced into the charter if necessary. The procedure for the selling of shares has also been amended: Deals on the sale of OOO shares are to be notarized, otherwise they are considered void. From now onwards, it is the notary which is to provide information on shares-selling deals to the registration authorities.

So, in order to bring documents of the existing OOO into line with the new legislation, it is required to compile a new edition of the OOO’s charter; Agreement of Incorporation as well as some other applications that are to be filed with the registering authority: The Tax Inspectorate. All of this might really not be a problem if it wasn’t for the fact that the application forms are still not approved; despite the new federal law already being in force. Thus, many companies that have already filed applications using the samples approved by the prior statutory act have been refused re-registration because of invalid forms of application, although this has now changed and the old forms are being accepted.

Thus, it would appear that it is not only entrepreneurs who were not ready for legislative changes but also those state authorities which are supposed to bring documents into line with the new rules.

As was stated above, OOO is the most widespread legal form of organization in Russia. The total amount of OOOs on the territory of the Russian Federation currently exceeds 1.5 million. Therefore, taking into consideration the fact that the Tax Inspectorate is not absolutely ready for the flow of applications and the mess with examples of application forms, it is doubtful that all these companies will succeed in re-registering their documents until January 1, 2010. Last summer, when only a small number of entrepreneurs were aware of the changes and were eager to commence work on re-registration, standing in queues to fill out applications took about two hours; at the moment it is already no less than 4-5 hours, while we foresee that in December people will have to take their places in queues the day before they submit documents.

It should be added here that it is still unclear what will happen to companies that will not manage to re-register their documents by January 1, 2010. First of all, such companies may be liquidated by judicial means. Thus, the Tax Inspectorate will be in a position to liquidate companies registered in the name of nominees; companies that do not file accounting reports, as well as abandoned companies. They may also say that refusal to re-register the company’s documents within the specified time will be interpreted by tax officials as a sign of inappropriate behavior. In each of these cases, the Tax Inspectorate will instigate a check-up.